【MACRO Alert】Russian natural gas supply interrupted ! Oil and gas market usher

Oil prices are expected to hover around $70 a barrel in 2025, according to a monthly survey published by foreign media, a forecast that brings uncertainty to OPEC+'s efforts to support the oil market. The survey showed that due to weak demand in Asia and increased global supply, the average price of Brent crude oil in 2025 is expected to be $74.33 per barrel, a slight decrease from the forecast of $74.53 in November. So far this year, the average price of global benchmark Brent crude oil has been about $80 per barrel, and it is expected to fall by 3% annually. Economists expect the average price of WTI crude oil to be $70.86 per barrel in 2025, compared with the expectation of $70.69 last month.

Most respondents expect an oversupply in the oil market next year, with analysts at JPMorgan predicting that supply will exceed demand by 1.2 million barrels per day. OPEC+ delayed the resumption of oil production by three months to April 2025 at its December meeting and extended the full lifting of production cuts by one year to the end of 2026. The decision was based on expectations that non-OPEC+ supply growth will outpace demand growth in 2025, leaving OPEC+ with limited room to increase production.

Meanwhile, Russia's Gazprom stopped shipping gas to Europe via Ukraine, shutting down a route that had been in operation for 50 years. The decision means central European countries that rely on gas transit will be forced to source more expensive gas from elsewhere, adding to supply pressures. While the route accounts for just 5% of Europe's demand, countries are still struggling with the aftermath of the energy crisis sparked by the Russia-Ukraine conflict. Gas prices are up 50% year-on-year, having risen in recent weeks on looming supply disruptions.

As the continent becomes more dependent on global liquefied natural gas, it is now increasingly vulnerable to market fluctuations. For Russia, losing one of its two gas pipelines to Europe would cost it about $6 billion in annual revenue, Bloomberg calculations show. Ukraine would also lose transit fees and give up its long-standing strategic position as a cheap energy channel for Western allies.

Tatiana Mitrova, a researcher at Columbia University's Center on Global Energy Policy, said the end of gas transit is more than just a supply chain adjustment, it symbolizes the collapse of an era. Most of Gazprom's Central European customers have managed to find alternative supplies, but at higher costs. Slovensky Plynarensky Priemysel AS, Slovakia's largest gas company, said it would pay about 90 million euros more per year to guarantee stable gas imports via different routes.

The market is also preparing for major policy shifts, including tariffs, deregulation and tax revisions, as Trump returns to the White House in January 2025. Kim Fustier, head of European oil and gas research at HSBC, said that in terms of the impact on oil prices and the domestic oil and gas industry, the impact from U.S. politics is smaller than many people think. However, some analysts pointed out that the Trump administration's tightening sanctions on Iranian oil exports may support oil prices in the short term.

Across Europe, the loss of some key Russian pipeline gas threatens to lead to higher bills for households and industry as it struggles to recover from its worst cost-of-living crisis in decades. European Commission President Ursula von der Leyen has set a political goal of phasing out Russian fossil fuels by 2027 and has previously said ending gas transit would have little impact on regional energy markets. “The cessation of transit via Ukraine on January 1 is an expected situation for which the EU is prepared,” a European Commission spokesman said.

Against the dual backdrop of the global energy market, the 2025 oil price forecast and the disruption to Russian gas supplies reveal the complexity and uncertainty of the energy sector. On the one hand, oil price fluctuations are profoundly affected by supply and demand, global economic dynamics, and policy decisions. Oil prices are expected to hover around $70 per barrel, reflecting market concerns about oversupply and slowing demand growth.

On the other hand, the suspension of Russian gas deliveries to Europe through Ukraine not only marks the end of an era, but also foreshadows new challenges for Europe's energy supply. This change not only affects the economic interests of Russia and Ukraine, but also has a direct impact on the energy security and costs of Central European countries.

As the global energy transition progresses, especially in the context of the shift to renewable energy and electric vehicles, traditional energy markets are facing unprecedented challenges. Policymakers, energy companies and consumers must adapt to these changes and find new solutions to ensure sustainable energy supply and price stability.